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MPs to probe the likes of BN66

Backdating tax law so that liabilities are imposed retrospectively, rather than from when the government actually introduced the law, will reportedly face the scrutiny of an influential panel of MPs.

In news initially welcomed by contractors – thousands of whom received backdated tax bills under ‘BN66’, a newspaper said the Treasury Select Committee (TSC) would’ “investigate” retrospective taxation in the coming weeks.

Although HM Revenue & Customs has so far been legally permitted to claim back tax retrospectively, as it did under Section 58 of the Finance Act, the committee is reportedly concerned that it dogs the system with a “lack of certainty”.

The concern from the House of Commons committee, which is shared by many tax experts, was expressed following the Treasury’s decision to introduce backdated rules to prohibit what it called “aggressive” tax avoidance by Barclays.

After the law was adjusted by Her Majesty’s officials, the bank said it respected the decision (indicating that no appeal is currently planned) and committed to complying with the “modified law once it is in place.”

While such wording appears at odds with the nature of retrospective taxation, Barclays will watch any TSC enquiry with interest, given that it was forced to halt two schemes and pay £500m due to the ex-post-facto law.

But far from an ‘investigation’, AccountancyWEB understands that the MPs’ scrutiny is unlikely to represent a dedicated inquiry into the issue owing to a “lack of space in the calendar,” which the TSC website confirms is full until June.

Contractors seem likely to be disappointed too, because the committee’s focus will be on the moves from the authorities to retrospectively tax “institutions,” The Daily Telegraph reported, rather than individuals or companies.

However the retrospective closing of the loophole that once permitted contractors to lower their income tax and national insurance bills might still resurface, as the committee is scheduled to grill George Osborne, chancellor, following his 2012 Budget on March 21st.